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Calibrating and Circumventing the Cost of College

It’s a common refrain that today’s college graduates are entering into the worst job market and economy since Hoover was around. We’re told that an undergraduate degree means less than what a high school diploma once was, yet we’re investing more in school than ever before. Post college debt is a major emotional weight on the backs of this newest generation, and colleges encourage debt with ease — don’t worry about it; you don’t have to pay it off until after you’ve graduated and have a well-paying job.

We’re sold on it and it’s a hard sell, not only by schools, but by the banks’ ad dollars, as well. Previous generations didn’t start life with so much debt, and in the middle of a job-killing recession no less. You probably aren’t going to pay off that kind of debt waiting tables. Realize that college debt most likely means postponing life goals such as mortgage, car, marriage, and maybe even children.

Good-to-know facts about college debt
How big of a problem is the cost of college? Consider the following:

According to FinAid.org, average student debt has increased nearly threefold in the past two decades, from $9,320 after graduating to $27,204.

In the year 2000, the nation owed $198.32 billion. In 2010, the number rose to $832.99 billion, more than four times what it was only a decade ago.

Declaring bankruptcy can free you of your mortgage, car loan, and consumer debt, but not your college loans.

Finally, unlike most other debts, many college loans survive your death.

How much college debt is too much?
So let’s get this out of the way first — whether you’re a parent or a student, college debt is not something to worry about later. Don’t take out excessive amounts of loans unless you know your first steps to getting it paid off. What’s excessive amounts of debt? The advice I received was making sure that debt didn’t amount to more than a year’s salary in my chosen field. Don’t take out $10,000 a year in loans if you’re looking to work for a non-profit after graduating.

Scholarship essaysI knew I didn’t want to spend time in a 500-person lecture hall. That was a huge priority for me. But with smaller class sizes comes larger tuition costs. This was the first time I had to start closing doors. I always did well in math and science classes, but I knew that I didn’t want 50 years of them in my future. I had fulfilled the math and science requirements for most of the programs that piqued my interest during preliminary research. I dropped my AP statistics class and used the period to enroll in an independent study in essay writing with an English teacher I had had earlier in my high school career.

Every week, I sat alone for four days and wrote essays. At the end of the week, the teacher and I would get together and review them. Yes, it did help to prepare me for the incredible amount of writing I would do in college, but perhaps more importantly, every single week, I chose one to three scholarship application essays and applied. The essays ranged from reviews of classics to thoughts on racial reconciliation, from 400-word essays about how I’d fix the AIDS crisis in Africa (Fix it in 400 words? Really?) to why I use Gillette for all my shaving needs. I knew that every dollar I received was an interest-free dollar I wouldn’t have to pay back later.

Yes, $250 might be a small amount off the thousands in loans, but that’s one month after graduating I wouldn’t have to pay, and if I earned 10 scholarships suddenly I’ve got my first year of debt paid off. That said, scholarships be can be in excess of $10,000 for your first year on the higher end. Check out websites like Fastweb and FinAid! to find scholarship essays and contests that work for you. Most high schools have listings of local organizations that offer scholarships, whether it be a rotary club or a local arts foundation. The money is out there. And scholarships shouldn’t stop with your first year. Some listings are for current college students. Research, write, and go claim it.

Colleges invest in their upperclassmenMost universities, even ones that claim to not offer any merit-based scholarships, offer more and more need-based financial help as students increase in seniority. At my alma mater, Sarah Lawrence College, despite the shocking initial sticker price being among the most expensive schools in the country (if not the top of the list), Sarah Lawrence gets increasingly generous with her in-house aid. By my senior year, I was paying less than a third out-of-pocket than what I paid my freshman year.

With fewer and fewer college freshman graduating in a timely process, it makes sense that schools would want to invest in those looking to actually complete the program. Inquire about averages from your potential school’s financial aid department.

So what now?
Unfortunately, most articles you read about staggering college debt offer little in the way of solutions and often end up concentrating on the bigger problem of the higher education system. That’s great, and should definitely be addressed, but what do we do now?

Parents, if you just had a child, put money in a college fund. Get the cheaper crib and invest the rest toward college. Also, do everything you can to learn the ins and outs of the FAFSA. If you’re interested, we can cover this in a later post. Okay, onto us kids…

If you’ve just graduated, you’re used to things like roommates and a rather low cost-of-living. Stick with it. No need to upgrade yet. For a $20,000, the minimum to pay off monthly is $200 over 10 years. Find the roommate, pay an extra $100 a month toward your loan, and you’re debt free in six years instead of 10. Find a loan calculator online to see how long it’ll take you to pay off your debt with different monthly payments.

Use any bonuses, raises, and gift money to pay a little more on a monthly payment. It’ll keep the interest in check.

Delay the real world. There are masters programs that offer grants for tuition and yearly stipends (many will equal the salary of an entry level job) . I’m not recommending taking out more money for grad school, but rather, find a grad school that will help you defer the interest on your loans while you still save to pay for them.

Get creative. After graduating, I worked as an au pair (childcare provider) for a year. I didn’t pay for housing or food, had to clean up a lot of peanut butter, and got to study algebra while receiving a small weekly stipend. I took on a second job while the kids were at school. I had two incomes and zero expenses. There’s no reason you can’t get creative and most employers are excited by a little life experience before entering into the job field.

Whichever college you end up choosing, truly choose it. We can argue about whether or not college is a necessity. We can argue if the high sticker prices at many schools are worth it. That said, at the point you decide that the investment is worth it, treat it as such.

Some people have the impression of liberal arts students lounging around talking about old books and goofing off for four years, coming out with a degree that is not economically viable. If you’re looking to pay off college loans into your 40s, go ahead and do that. Or, put your passion, intelligence, and unfaltering work-ethic into everything you pursue, and your degree will prepare you to navigate an ever changing world. With a liberal arts degree, you won’t be able to make, design, or build widgets for your given company, but you’ll be able to think critically about where the widget’s place is in society, the future of the widget, and the direction in which the widget maker needs to go. Ultimately, that’s the work of CEOs.

In a society where we’re sold on the fact that college is essentialwhatever the cost, it makes sense that those who don’t consciously choose their education would be resentful of the package of goods sold and the debt to follow. College degrees no longer directly equate dollar signs and zeros at the end of salaries, but instead can account for the x-factors — the intangibles of life fulfillment and the ability to do a job and not just get a job. Stand behind your investment. Put a lot of time, research, and perhaps money into your education, and it will pay you back.

What are some of your stories, good or bad, about college debt? What are some helpful hints you’ve come across?

I just paid off one of my student loans not 30 minutes ago. Bye bye 2k of debt.

I kept my college costs down by working for the school in a tech support position that paid R&B (half the cost, effectively).

If your priority is to not go massively into debt, look at your public school options. Also, consider investing in a double major if you love the liberal arts with something more technical. After all, the purpose of the liberal arts education is to expand your horizons.

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getagripsays:

26 October 2011 at 5:29 am

I give my kids the following choices:
Two years community college, two years in-state school, on me.
Four years in-state school at the dorms, you graduate with an expensive new car payment on something that you’ll never drive and assuming you get a job will likely pay off by the time you’re thirty (oh my God I’ll be so old!).
Four years out of state or most private schools (without aid, both had offers equivalent to in-state with aid they considered), you graduate with a home mortgage for a house that will never provide you a place to sleep, which you’ll hopefully pay off by the time your fifty.

That seemed to make them pause and think more about it than the actual numbers. Out of two so far, the car payments seems to be the prefered choice. Both really wanted other colleges which offered nothing financially but lots of loans. It took the home mortgage analogy to help change their minds because they really wanted to attend those schools and the financial aid folks told them they could do it no problem. Both are happy with their choices so far.

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Cassiesays:

26 October 2011 at 5:33 am

Sorry, this was just driving me crazy and I had a hard time concentrating on the rest of the article.

I corrected this and the “chose/choose” error. I’ll be back to editing later today. In La Paz now and will fly to Lima in the late afternoon. In theory, my hand will be on articles starting with tomorrow. (In theory!)

But April has done a great job in my absence, and I’m truly grateful for her help. It’s made my life so much easier.

Wow, I didn’t realize this was a perk of going to Sarah Lawrence! Made me laugh.

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LAsays:

26 October 2011 at 5:35 am

By the time I finished my Master’s degree, I had paid $2,000 for my college degrees. Total. No student loans.
My methods won’t work for everyone, but I would encourage people to look at 2-year community college/technical programs (my experience has been in healthcare). In particular, programs that are sponsored by hospitals (although these are a dying breed) are very inexpensive. For instance, even though I received scholarships to pay for my first two years, it would have only cost me $3000 (books, tuition, and fees) because the hospital paid for 80% of the education. Then my employers paid for most of my Bachelor’s and Master’s degrees. If I started my PhD, same thing. Again, this doesn’t work for everyone, but if you have an interest in these fields and want to make a slightly above average income, I highly recommend it!

Good article. I will say, though, that sometimes small scholarships don’t help much. For instance, I received a $250 one from my high school. Guess what that meant? Basically my private university just reduced their grant to me by $250, so in essence it didn’t really mean any less money that my parents had to pay.

I graduated from college over ten years ago, and I’m still kind of bitter by how the FAFSA calculated how much my parents could pay. I don’t believe my dad ever made more than $60,000 a year, and I think we only received a $5,000 grant for two years of my private university education. And that was only because my brother was in school as well those two years. The last two years my father had to pay it all in full (and me through student loans). Tuition at my university was $21,000 when I left in 1999. So, in essence, they expected my father to pay a third of his yearly salary to my education.

He was penalized because he was frugal and saved money all those years. Also, my grandmother had just died a few years before, and there was a house and estate wrapped up in probate that he had to declare on the form. In hindsight, maybe he should have bought a few cars or a house right before I applied. I remember one friend mentioning how her father made $100,000 a year and that she got considerable aid from our university. Basically the gist of it was that they were good at hiding their assets.

The whole system needs to be reformed so that they don’t penalize saving or frugality. The way it is set up now basically just encourages people not to save for college.

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Hollysays:

26 October 2011 at 5:54 am

Jane, I understand how you feel. I had a conversation with someone just yesterday about this.

However as a parent, I’m loathe to blow my money on vacations now if there is a possibility I may end up sticking my kids with giant college loans later. OTOH, I am definitely planning to lay out the options and consequences before they make a choice of college.

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Jensays:

26 October 2011 at 6:41 am

Yup. My husband and I were just talking about this, since our second child is doing applications right now.

We’ve saved all along for both retirement and college (3 kids, but youngest one is 8 years younger than the HS senior). And now, it’s bitten us in the butt. Looking at various financial calculations that colleges show, it feels like we’d have been better off taking extravagant vacations and paying for all sorts of glamorous activities for the kids.

Not that we could have stood the anxiety. But it is annoying to see a breakdown for someone making tens of thousands more a year getting huge amounts of aid (most of the Ivies now aim to get kids out with no debt) because they have no savings.

There’s something wrong there and I don’t know how it could be fixed. Oldest is at a “state-affiliated” university with excellent resources, gets a scholarship from them and another from our school district. He’ll come out of school with no debt, and likely some money from grandparents left over.

Second son knows the drill, saw the numbers crunched for in-state at that university vs. private college in NYC offering 5K in merit money. We did the same analogy to a mortgage.

Fortunately, our kids are as cheap as we are. When oldest was heading off to school in 2009, we were in the throes of the meltdowns. Looks like the same situation three years later to place in front of child #2.

Maybe child #3 will find a trade to go along with a college education and support us all in the future?!

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Marshasays:

26 October 2011 at 12:48 pm

We never opened accounts in our children’s names because we realized when they were little that it would be best as far as the FAFSA is concerned if they were technically broke. Instead, we stuffed every possible penny into retirement accounts, which are not considered assets for the FAFSA. My kids’ grandparents saved money too, but kept it under their own names. Since our retirement account is very healthy, we can lower the amount we’re socking away for retirement and pay some college bills out of current income. Fortunately, our older son got a large merit scholarship that covers most of his tuition, and since he chose a nearby college, he lives at home. When our younger son goes in a couple of years, he should be eligible for student aid, with any shortfall covered by his grandfather’s generosity. In a pinch, we can borrow from our 401k. Of course, we’re hoping he gets a scholarship as generous as his brother’s, so that both our retirement account and grandpa’s funds can remain untouched. Any money not spent by his grandsons for college will be gifted by him when they graduate.

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Janesays:

26 October 2011 at 1:23 pm

This is exactly the approach that we are taking with our two young sons. Everyone kept on urging us to open 529s, but instead we are using our Roth as a college fund for the time being. They are still very young, so we might change things as the years progress.

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Dansays:

26 October 2011 at 7:19 am

I’m bitter too. While I was growing up (80′s and 90′s) my parents didn’t make much money — less than $40k/year. My grandfather knew it, so what did he do? He socked away $20k for me, payable over four years.

So what happened? I was disqualified from Pell Grants because of that. Grandpa just saved the government $20k, wasn’t that nice of him?

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Sandysays:

26 October 2011 at 11:16 am

Ok, but do you really think Pell Grants would have equaled 20k?
I make less than 20k a year and returned to college as a non traditional student and even though I did get Pell grants, I still had to take out loans.

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Jaime Bsays:

26 October 2011 at 2:24 pm

That is a good head’s up for parents – not every school structures their finaid the same way. I had a good friend in high school who was looking to go to Harvard. He’s highly intelligent and driven, so he’d managed to secure $20,000 in scholarships – then he found out that Harvard would just deduct that amount from the amount they were offering. He opted to go to a state school, won further scholarships to study in Israel and England and finally came back to the US to go to Harvard’s law school. lol, full circle.

That was over 12 years ago, but I’ll always remember my friend’s shock at the way aid was structured.

My own issue with FAFSA was that I couldn’t apply for aid under myself until I was already done with college. I was living on my own, paying all my own bills and my parents weren’t helping me with college, but I could not apply alone for aid. One financial aid person was very snotty and told me that the government did that so people would go from depending on their parents to depending the government. Seriously. She quite efficiently killed all desire I had to attend that school.

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Gracesays:

26 October 2011 at 7:10 pm

A decade ago, I had a similar experience in regards to the financial aid office. My state school has an excellent reputation for my field(engineering). I called the financial aid office of an Ivy I had been accepted to and asked if they could match what the state school costed. The woman on the other end was incredibly snooty and basically hinted that if I wasn’t willing to take out +50k in loans, then maybe I didn’t belong there. A friend of mine went to MIT in the same time period and said they matched what her state school costed and gave grants to cover the rest. If I could do it over again, I would hope that someone else picked up my phone call. It turned me off completely from the school. I occasionally wonder how things would be different, but I’m definitely glad I don’t have student loans.

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imeldasays:

26 October 2011 at 8:26 pm

Same thing happened with my friend. Her parents were total deadbeats and wouldn’t offer her a dime for college, even though her father earned a pretty high income.

I think Barnard College’s advice was to divorce her parents.

She had already completed 1 year of college at a cheaper community college, and then worked out a program to finish her degree in 3 years total. She still graduated with a ton of debt.

I had the same issue- I worked since I was 14, bought my own car, school clothes, cheerleading uniforms, the works. Worked full time all through college, didn’t get help- yet had to claim my parent’s income.

I begged the financial aid office to please help me, and they said unless my parents were in an insane asylum, or charged with abuse that led to my “divorcing” them, they couldn’t do anything.

Yet my young, married friends got to file “independent”, get financial aid, HUD, etc., and still get help from their (generous, wealthy) parents. The system is broken in this regard. The fact that one must be TWENTY-FOUR until one can be declared independent on the FAFSA is insane. It makes the assumption that everyone in college has great relationships with wealthy, generous parents. Not the case.

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Jaime+Bsays:

27 October 2011 at 12:02 am

Whoops, I didn’t mean to imply my parents were or are deadbeats. They are wonderful, it’s just that I had already started and dropped out of college once – invalidating all of my scholarships. From then, I was on my own and was still a little flakey about staying in school. I finally got my act together, but was still too young to apply for the FAFSA on my own.

That snotty lady said the same thing, unless my parents were abusive I had to claim them on the form. I was especially angry because of her snippy comment about going from being dependent on parents to being dependent on the government – what exactly was she saying about all of the parents of the families that do qualify for aid? I would have been happy to meet some burden of proof for independence – lease, utility bills, etc. There is a definite gap between assisting families and recognizing independent adults 18-25. One of my best friends came from a moderately wealthy family and her parents never paid a dime for her education. She could definitely have used the assistance of even small grants.

My husband had a similar problem that forced him to delay going back to school. I understand that the system is designed to prevent circumventing by every child being declared as independent. But my 23 year old husband (then boyfriend/fiance) had to delay college for two or three more years because they wanted financial info for his Mom & step dad as well as his Dad and step-mom. (both of whom live in states on the other side of the country). He had been living on his own, paying his own bills for two years, but they still were going to count all four of those incomes. Also, unless they have changed the FAFSA, the system is a little biased against kids from blended families. Just because both his parents remarried doesn’t mean either step-parent is willing or obligated to provide college assistance. His deadbeat step dad barely pays for the bare necessities for his mom and half-sister who is only 15. His mom works constantly to try to keep up with the bills herself. He wasn’t giving a dime toward anything for his step-kids.

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Jaime Bsays:

27 October 2011 at 1:19 pm

Blended families are a whole other issue. Since my stepdad didn’t adopt my brother and I, the cost of our care was not figured into the amounts assessed for the child support he owed for his two daughters. However, since we were his dependents we had to claim his income on the FAFSA (our birth father is dead and Mom was a SAHM). Concurrently, my stepsisters were able to choose which parent to claim on the form and chose their mom since she made less money (even though my oldest sister was a dependent on my stepdad’s taxes and lived with us during high school). So, since their mom made little enough money, they were eligible for pell grants that my brother and I were not eligible for under our stepdad’s income.

Great article with lots of practical advice in it. I would add a few bits and bobs based on my current student experience.

First off- don’t rush into university, especially if you don’t know what you really want to do. My brother was pressured into going to uni straight from school at the age of 18 (the school wanted to be able to say that X% of their students went on to higher education). He ended up choosing a BA he ultimately didn’t have the heart to do, Maths, and chose his location based on where his girlfriend studied. After his first year he dropped out and spent 2 years working as a pizza boy. Eventually he found a communications company, worked a lot of horrible night shifts and has taught himself website programming and marketing and is now earning a good wage. But he is still saddled with a fair bit of debt from that one year, plus owes my mum and dad money and still lives at home. If he’d paused after school and thought about what he actually wanted to do, it would have saved him a lot of money and misery.

Myself on the other hand, went to work in an office straight from school on a 10 month contract. A client contract went belly up due to the recession so I was let go at the end of my contract. At this point, by living well below my means, I’d saved £4000… which I then spent going to Japan, Portland and Hawaii. When I got back and the jobs situation was still dire, I applied for university, having realised during my time away that the one thing that made me really happy was making things and the best way to get into doing this professionally was to study at art school. I managed to get some employment before going off to uni and did save a little. I’m at the start of my second year and have no consumer debt, only my student loan, which I don’t have to pay back until I’m earning £15K+.

My second piece of advice would be to get used to not getting what you want and find a lifestyle that is based on your budget, not your friends’! I can’t find a place in London within my rent budget this year, so I have to live with my parents and commute in. I’m crowd phobic, so this is hell for me, plus half the time I’m carrying an A2 portfolio or my training kit for cheerleading. Now let’s compare that to my friends:

One lives on her own in a flat, at a cost of £350 a week- courtesy of mum and dad. One parties 4 nights a week- again, thanks to their parents’ wallets. One lives with his long term partner in a million pound house bought with cash earned from working hard for 15 years. I have to accept that I can’t magically make myself an only child with doctors for parents, nor can I magic 15 years of savings into existence, so for the time being, I’m stuck carrying 15kg of gear on a train with a business man’s armpit stuck right in my face. But it’s okay, because I love my course!

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Jeansays:

26 October 2011 at 6:54 am

Hey, Ru, I’ve met students like you on my train to work, and I really admire your doggedness. I can barely tolerate my daily cross-London commute with my little backpack — and here you are traveling in from well outside the city lugging all your books and equipment, often not getting a seat. I hope you finish your course with flying colours and get yourself a wonderful career afterwards where you will never again have your face in some fellow commuter’s armpit.

You’re right about not getting a seat most of the time, and I also get a lot of dirty looks from commuters for having so much luggage. But I have had some lovely moments of compassion from Londoners- when I was ill with the flu I must have looked absolutely wretched because I scored a seat both ways for 3 days straight!

One day I’ll have my own studio and a commute, out of the bedroom, downstairs, and to the end of the garden

“Whichever college you end up choosing, truly chose it. We can argue about whether or not college is a necessity. We can argue if the high sticker prices at many schools are worth it. That said, at the point you decide that the investment is worth it, treat it as such.”

LOVE IT!! I agree with you 100%. One of the bigger problems is that many kids coming straight out of high school don’t treat the college experience (and costs) as a disciplined investment. Many of them don’t have parents knowledgeable enough to guide them either (or interest enough to guide them in many cases). Heck, the students don’t even have to ask themselves, “can I afford the payment” because the payback period is so far in the future; they have time to figure it out by then right? I graduated in 2008 with close to $50K in student loans. I paid back every red cent in just over 2 years, but buddy let me tell you – it was painful!! I should have been able to graduate with about 25K in student loans if I had been more disciplined in my investing. Then again the debt did motivate me to work with excellence and to be a good provided for my family. Cheers everyone!!!

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Mattsays:

26 October 2011 at 5:50 am

I graduated high school in 1996, spent two years at a community college while living at home and paid cash for tuition/book by working two part-time jobs. The next three years I spent at a in-state university, living with roommates, working two part-time jobs to cover living expenses and took stafford loans out to just cover my tuition and books each semester. Yes it sucked, I had little free time, didn’t party near as much as my friends, but the $12,000 in school loans I took on was paid off three years after I graduated. My friends are still paying off the debt they accumulated.

My current employer will cover up to $3,000 a year in tuition costs so I spent the last 3 years working on an MBA, using the $3,000 my employer gives and supplementing the rest with money that I save.

We have this talk regularly on our site. I think you made some great points. I too was a huge fan of entering my name in as many scholarships, bursaries and grants as possible. I’d put my total somewhere around $15k over two degrees, and I had only good grades, not spectacular grades! When you consider that you’ll be paying back loans with after-tax dollars, that’s a lot of money saved in the long run! I should point out that I went to school in Canada, where a lot of our education is subsidized. The end result was that I was able to graduate without any student debt at all.

As far as the worth of an undergraduate degree, I have become more and more a fan of trade schools. For some reason they don’t have the reputation appeal, but I believe they are the vastly better option for a lot of students. With the demand for trades only growing, I’d be willing to bet that the wages between a journeyman tradesman and a university undergrad slant pretty heavily to the “blue-collar” guys.

Check out our site for a ton of tips on scholarship applications etc.

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Ericsays:

26 October 2011 at 6:13 am

//I had fulfilled the math and science requirements for most of the programs that peaked my interest during preliminary research.//

[dictionary]The word you’re looking for there is “piqued,” not “peaked.”[/dictionary]

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Kayteesays:

26 October 2011 at 7:24 am

Maybe fulfilling the math and science requirements was the high point.

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Hannahsays:

26 October 2011 at 6:26 am

I actually have to disagree with you on the “Colleges invest in upperclassmen” part. Unless you have it in writing, don’t assume that your aid (merit-based or otherwise) will increase, or even stay the same for your whole undergraduate career at the same school. Many Colleges and Universities have GPA requirements or stipulations (taking a certain number of credits, etc) in order to maintain your standing for merit scholarships.

Additionally, Colleges and Universities measure much of their success in how many freshman enroll each year (obviously, it’s tuition money in the bank for them), which leads many to give large merit scholarships the first year, which taper off once students are enrolled. Upon receiving a financial aid package, it is important to assess what the aid will look like over the next 4-5-6 years. A school that gives less merit aid, but guarantees it over 4 years may be a better deal overall than one with a large scholarship the first year, and then no guarantee of anything for the rest of your time there.

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Ninasays:

26 October 2011 at 7:29 am

Yes! I was going to comment on this as well. I went to a small private liberal arts institution and when I was accepted I was offered a four year renewable scholarship that covered about a third of tuition, and a handful of other small scholarships that were not renewable and basically designed to entice me to enroll. Coupled with tuition hikes during my four years I took out thousands more in loans my junior and senior year.

There are several factors that lead to this, but I think a big one is endowment size. Sarah Lawrence is well endowed and they invest in their upperclassmen to keep their graduation rates high. My school is more dependent on tuition revenue.

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imeldasays:

26 October 2011 at 8:39 pm

You said it. I felt particularly betrayed by my college because I transferred there sophomore year. It was a big, difficult decision to make. If I had known that after my first year, they were going to strip me of my Pell Grant and other aid because they save those to attract incoming students, I might have reconsidered.

I have to agree, the cost is more likely to go up for upperclassmen than down. Even hanging onto a merit scholorship could fall apart. I got into a College of Pharmacy after 1 year of pre-Pharmacy at the same University that only accepted GPAs 3.8 and above. Then proceeded to grade on a curve. Suddenly 4.0 students were fighting to get C’s.

Also, the “professional fee’s” that I was assured would not be a problem as a senior in high school ($1000/yr at the time) exploded to $5,000/yr by the time I graduated.

I would add that if you have certain types of loans (government loans, I believe) and work for a nonprofit for 10 years, at the end of those 10 years your loans will be forgiven. The 10 years don’t even have to be consecutive, they just have to occur after you’ve graduated. I’d also add that there are a lot of ways to lessen expenses while you’re in school. I was an RA in college and while I did have to live in the dorms when all my friends had their own cool, off-campus apartments, I also didn’t have to pay anything for rent or food. That made a huge difference. Finally, I think that people have to be prepared to rough it a little bit. Before I went to college, my parents regaled me with stories of working in factories during the summers and collecting cans so they could buy food. Really puts that “I need a new ipod!” mentality into perspective.

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Tomsays:

26 October 2011 at 7:28 am

Reidence Life! A fantastic way to shave $1000s off of your college bill (and earn a small income at many schools).

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elorriesays:

26 October 2011 at 1:34 pm

I too was an RA and it saved me a ton of money. At the school I went to room and board was $10k+ a year. Not many other jobs you can work during college spending less than 20 hours/week and make that kind of money. Add to that the fact that you can also be an RA during the summer which allowed me to have a full-time job and zero living expenses.
But you have to be careful there with financial aid as well. At my school the free room and board was basically detected from your financial aid packages, so you’d be essentially working for nothing. It was kind of funny how this pretty much cause all RAs to be from a very narrow economic background: parents make too much to qualify for aid, but not enough to be able to easily afford school out of pocket.

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imeldasays:

26 October 2011 at 9:11 pm

I’m sorry, but I found a lot of problems with this article. Namely:

1. Most universities, even ones that claim to not offer any merit-based scholarships, offer more and more need-based financial help as students increase in seniority.

As others said above, this is NOT the case in my school, Barnard College, and I can’t imagine it’s the case in most. Schools offer their best aid packages to attract incoming students, and cut back on older students’ aid to afford it.

2. For $20,000, the minimum to pay it back is $200 a month.

I took out about $26,000 worth of loans and pay $180 per month, at 6.8% interest, fixed.

3. College degrees no longer directly equate dollar signs and zeros at the end of salaries, but instead can account for the x-factors

Hasn’t it been established again and again and again that college degrees DO, on the whole, get paid back in higher earnings and less frequent unemployment?

4. Many schools, including mine (thank you, Barnard!) simply reduce the aid package offered to you if you get a scholarship. I remember busting my butt to get a $1,000 scholarship, because my parents were asked to pay about that much. (even though my FAFSA said they could only afford $200/year) I was going to have to pay it off, so I was really excited about getting that scholarship. Instead of applying it to that payment, Barnard applied it to the aid that THEY were giving me, and I still had to pay the $1,000 out of my work-study money.

5. Lastly, this might not be fair, but I have a hard time hearing someone say “apply for lots of scholarships” when he was able to do so by getting his high school to give him school credit for it!!!

Not that I disliked the article; I liked all of the sentiments behind it, but found it flawed.

As others have said, the financial aid system in this country is SCREWED UP.

Very great points, Jim. But the problem is that students don’t get this message when they need it and it’s too late by the time they figure it out.

As a HUD-certified housing counselor in an Ivy League university town, I break the bad news to the over educated and under employed people who want to buy their first homes.

Potential home buyers are shocked to find that their $150,000 student loans prevent them from qualifying for a mortgage at all. And even deferments won’t help for long (or at all if they’re guaranteed for less than 3 years).

BTW, do you want to know what many people do when they find out they don’t earn enough to pay their student loans and buy a house? They go to grad school–sometimes even paying for it with new student loans.

Even if you sit an 18 year old down and tell him these things, it doesn’t matter much. Most people aren’t thinking about settling down and buying a house as teenagers.

If you have a college-bound student in your household who will listen to you, here are some of the things I did to save money on my education.

1) I took every AP exam I could so I started school with a substantial number of credits.

2) I applied for many scholarships and even appeared on a televised academic quiz show to win money for school. It was thoroughly embarrassing but it put another $2,000 in the education kitty.

3) I chose a small, lesser known school with strong academics.

4) I worked all through college. One of my jobs was as a collection agent for a student loan lender. Talk about a dose of reality.

5) Every summer I took required classes at the local community college after work each night.

6) I graduated early. I got my last 6 credits by taking a course on Renaissance and Reformation history in Europe. Yes, it was cheaper to spend a summer in Europe than taking that semester of classes at my private school.

I was fortunate to graduate with very little student loan debt which I paid off quickly despite working at nonprofits at very low salary.

But as much as I encourage students to take personal responsibility for their situation, the solution to excessive student debt must include institutional changes as well.

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Dansays:

26 October 2011 at 7:26 am

Heh. I borrowed $40k as an undergrad, let $15k in interest capitalize, and then borrowed another $30k for grad school.

Undergrad? That was dumb. My thoughts were “I’m going to be an engineer, and engineers make good money out of school. They wouldn’t lend me money that I couldn’t pay back.” (And $40k wasn’t *that* much money.)

As an adult, I came to realize that huge racket that student loans are — lend large sums of money to a group without the maturity to understand what they are commuting to, and even worse, relieving them of the escape hatch that is bankruptcy.

Grad school, OTOH, was a carefully calculated risk that paid off. I significantly increased my income in a short period of time. I can pay on my loans without considering it a true hardship, but it *does* prevent me from buying or saving for a house.

I actually support programs to bail out borrowers, and to people who say we should pay for our mistakes, I say this: “I can’t buy your starter house that you are trying to sell at a loss until I have sufficient capitalization to do so.”

Student loans are creating economic gridlock — it isn’t just the “dumb” students who are suffering, it’s the economy as a whole. I have $500/mo that I would be willing to pump into the economy that I can’t.

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The+Other+Briansays:

26 October 2011 at 10:34 am

Oh, I see. If we let you hand off your *current* debt to others you would be willing to take on *new* debt to buy my house.

Yeah, that’s going to fix our economic problems…

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Dansays:

26 October 2011 at 1:57 pm

The trite answer is, well, “yes”

I’m not an economist, so I can’t tell you if that is the economically correct solution.

What I can tell you is that a crappy housing market is creating a huge drag on this economy. We can’t move houses or create jobs until the economy gets moving again. You can’t sell your starter house unless there is someone there to buy it. And as long as the younger generation is saddled with student loans and poor job prospects, you’re stuck too.

College borrowers get a raw deal. Since student loans are guaranteed and cannot be discharged in bankruptcy, the lenders take on very little risk. Lending at rates higher than inflation + “a little something for your troubles” is just a teeny tiny bit wrong, if not slightly predatory, considering most 18-20 year olds don’t have that much experience with personal finance. At least a home owner who borrowed too much can walk away from his house, with no recourse, in many states. (Yeah, I just pulled the “I didn’t know better” card. We let people do it with credit cards all the time.)

To be clear, I pay my loans like clockwork because that’s what I agreed to do, and there’s no mechanism for which I can get out of it. However, there is no denying that my loans are preventing me from buying a home. There’s also no denying that we have a crappy housing market that is creating a huge drag on our overall economy.

So, the American public gets to pick. Either I pay my student loans, or I buy your house, but I can’t do both. It’s up to you.

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The Other Briansays:

27 October 2011 at 4:18 pm

I agree that the loan rates are ridiculous. Next to US treasuries, they are probably one of the safest investments because of the discharge, estate and payback rules.

While I agree that forgiving these loans may have the short-term effect of stimulating house buying; in the long run, it will hurt the economy. Why? Because the cost of borrowing will either go up substantially for future buyers due to the default risk now assumed by lenders OR we will have have another FHA-type debt disaster in the making.

With that being said; would you like to buy my house? It is a nice 4 bed/3 bath in a good neighborhood. And for you, I will sell it at a GREAT price!

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Bensays:

26 October 2011 at 6:37 am

Please *do* return to the “ins and outs of the FAFSA” thread you propose could be discussed here on GRS – I bet there are plenty of us considering 429 plans and so forth who would *love* to get the lowdown on how to strategize so that we are not penalized (as Jane notes in her comment) for actually saving for college!

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CNMsays:

26 October 2011 at 6:40 am

I was lucky enough to graduate college with no loans; but law school loans were a killer. Scholarships to law school are rare. However, one way I managed to minimize them was I went to a school where the cost of living in the surrounding areas was relatively inexpensive. Also, law students sometimes fall into the trap of “spending like a lawyer” before they have gainful employment. I imagine that is not too uncommon across all graduate schools.

One grammatical quibble: a person’s interest is PIQUED, not peaked.

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Jeansays:

26 October 2011 at 6:41 am

Hmmm…lotta typos and other errors in this post. I assume the detail-oriented JD has not yet taken back the reins.

My parents (thank you Mom and Dad! Again!) sent me to the state school of my choice, and I took it seriously. I worked a part-time job (about 20 hours per week, more during the summer and winter breaks) to pay for books/gas/food and to save up for graduate school, which I was pretty sure I wanted to attend. I also took (and paid for) summer school courses at a very inexpensive community college, getting some of my introductory level lab-heavy science courses out of the way so that I could fit in extra upper-division courses during term time — getting in some cool ‘unrequired’ courses that I wouldn’t otherwise have had time to take. I think that approach more or less falls into Tim’s advice:

“Whichever college you end up choosing, truly chose it.” [sic]

The intro courses and required courses outside my major were largely hoops I needed to jump through to graduate, and also to get to the good stuff — the intensive, upper-division courses in my own areas of interest that were so compelling and challenging. It seemed like a good idea to get the intro stuff out of the way fast, in order to spend as much of my four years as possible on the good stuff. It’s a choice I don’t regret. If anything, I wish I had heard getagrip’s advice to his or her kids; I probably would have put in the first two years at a community college and saved my parents some money and me some travel time.

Oh, and I did go to graduate school. Took about about $20,000 of loans over 3 years, paid it back early though double payments and throwing found money at it. And I worked while at grad school, to keep the loans down.

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Kayteesays:

26 October 2011 at 6:41 am

When I was in college I found websites like Fastweb and Finaid! to be completely useless to me because of choices that I made in attending college. I’m sure they’re great if you decide to attend college right out of high school. Because I didn’t know what I wanted to study, I decided to take a year off to work and save up some money before attending college. I built up a cushion and purchased a small car that was supposed to be reliable and would last me through college.

Not being a high school senior disqualified me for most scholarships, as did not being an existing student. Nor was I an adult student. Oddly, I had too many college credits from my senior year to qualify as a college freshman, I was considered a sophomore. To help save money, I lived with a relative (45 minutes away from the school) and worked a minimum of 20 hours per week to make ends meet (ie – pay for books, gas money and car repairs). I worked full-time through every school “break” and summer “vacation.” Oh, and the car that was supposed to last through college died 6 months after I started and all of my “spare” pennies when to keeping a series of even crappier cars on the road to get me to and from school. Still cheaper than renting an apartment on my own near school. I think.

Fortunately, I chose a lucrative career path that, combined with a masters degree, meant I had my pick of jobs after graduation.

Still, I wish someone had sat down with me at some point and actually run the numbers on all these loans I ended up signing for. This was back when you walked into a school’s financial aid office and they shoved loan papers at you to sign BEFORE showing you scholarship programs. I had never heard of anyone taking gen ed classes at a community college and then transferring to another school. There is so much I wish I had known then.

So far, I have paid off 21% of my student loans. I have postponed buying a house to continue paying on these loans, saving for retirement and boosting my financial cusion. We also postponed having children to continue to dig ourselves out of debt. However, as my parts have a shelf life, we decided not to wait too much longer and are expecting our first child in a few months. It will extend the length of my student loan repayment, but I won’t be 35 trying to have my first child either.

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Daniellesays:

26 October 2011 at 7:14 am

I came here to second the choice to work as an au pair. Throughout college, I worked with an alum’s family, lived with them and everything. It meant free housing, food, and that I had to be much more dedicated to my schooling as my time was limited. It’s hard, but single parents do it all the time.

During the summer and on breaks, I worked even more. And if the family couldn’t offer me more hours, I picked up a second job at the grocery store.

A side benefit of working for someone who had graduated from the same school I was attending was that she could give me advice, and I even helped her write a few financial articles in my spare time. It was great motivation to keep me working hard toward my goals!

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b-bosays:

26 October 2011 at 7:27 am

The root cause of these numbers increasing is all of these for-profit private colleges that give you sub-part education and profit off of government loans and grants and help people get those loans as fast as possible. it’s like the mortgage situation. get people into school because its probably easiest loan to get approved regardless of credit or anything and then show them flashy commercials of some guy who was a fashion designer for stars, “works on video games all day”, or is an iron chef at the local chilis… and bango you got people coming out with mostly useless degrees, loaded with way more debt than they would have if they went to a traditional 4-year school, and not really much more prepared for the job market.

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tomsays:

26 October 2011 at 7:33 am

I noticed many university students aren’t very smart with their finances. I go to school in Canada and my school has a co-op program every 4 months so I work fulltime and study during alternate terms.

I do realize many students don’t have access to working full time while in school, so I’ll give some advice on how I make separate streams of income.

1. Entrepreneurial projects: I study finance, and going through the application/interview process multiple times now I can gauge what employers are looking for in a resume/interview. I started a finance resume editing service, which I currently offer for free because I want to gain more experience. I also do my own investing, putting in any spare money I have into stocks (I’ve read many investing books). And I’m learning how to trade currencies as well.

The point of this is that anyone can find a skill and work as a freelance consultant. If you can provide results to someone with your skills, people will pay for it.

2. I got a personal line of credit at a rate of 7.75% annual. I use this money to invest in dividend stocks giving me a higher return.

3. If you want to work a job that doesn’t require waiting tables or serving fast food, you’ll probably have to offer yourself for free. Until you get that experience, no one is going to give you a paying job. For my first couple of work terms I worked for free in an office in a finance related position. For my subsequent work terms, the amount of money I make more than makes up for those unpaid ones. And once you’re in a company, unless you screw up really badly, you’ll have more flexibility to work elsewhere.

4. I’m extremely into finance and entrepreneurship. I have to give credit to my program at school for building the foundation. However, I’ve been learning everything myself recently. It developed my attitude towards money. When I look at news or recognize trends happening, I instantly think of ways to profit off of it. I’ve never been this way before, it took a good year to make myself passionate and make this second nature. It’s also because I’m passionate about the process of making money, and the money is just a by-product (warren buffett).

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Spencersays:

26 October 2011 at 7:35 am

I don’t know if schools in the US offer this at all but here in Canada a number of schools offer co-op programs. I’m just completing my final year and I’m graduating with ~$20 000 in the bank. These positions are generally paid (although you can take volunteer positions too which provide a different kind of benefit). In any case, these are heartily recommended if you’re trying to escape school debt-free. University of Waterloo, University of Ottawa, University of Victoria, and Carleton University all offer co-op programs as do some colleges. It’s well worth looking into. Plus, over a year of real work experience doesn’t hurt either.

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Natesays:

26 October 2011 at 7:39 am

“With a liberal arts degree, you won’t be able to make, design, or build widgets for your given company, but you’ll be able to think critically about where the widget’s place is in society, the future of the widget, and the direction in which the widget maker needs to go. Ultimately, that’s the work of CEOs.”

A bit arrogant, considering that the top degrees for CEOs are engineering and business administration.

Not to say that it isn’t done, or that the degrees have no value, but it’s disingenuous to paint the picture that running a company that designs and produces tangible goods is a generally viable career path for someone with just a BA.

Edit: okay, not exactly a direct refutation, but I didn’t have the time to make a long argument about how Tim’s point is essentially right– that the skills needed by a CEO are the skills the liberal arts provide. How to get to the CEO from a BA in liberal arts is another story (hence he said “ultimately”). But an engineer who doesn’t understand society or human psychology is not going to make CEO in a million years either.

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Natesays:

26 October 2011 at 12:09 pm

Well, that’s okay, because the *facts* disagree with you. Liberal arts degrees make up somewhere between 30% and 40% of all degrees granted currently (and historically as well, except during the 1980s, when it was quite a bit lower), depending on how you interpret it [1]. 15% [2] or fewer [3] of all CEOs have only a liberal arts degree.

Moreover, 60% of all Fortune 500 CEOs have graduate or higher level degrees [4]. 19, like Steve Jobs himself, received no degree at all.

I never said you can’t do it. I never said it didn’t happen. I’m not even saying that it’s bad when it *does* happen. All I’m trying to say is that it’s disingenuous to tell people that they’re cut out to be CEOs, when it largely is not going to happen.

If you want to be a CEO, here are my tips:
* Be born into a wealthy family,
* Failing that, be a genius,
* Go to a top school, where your friends are mostly either wealthy or geniuses or both,
* Failing *that*, work your tail off your entire life, and get incredibly lucky.

Oh, and for the record, people skills don’t come from majoring in psychology. People skills come from dealing with people – full stop.

Here are my sources, so you can prove me wrong:

I really wanted to paste the full sources here, but for some reason I *can’t*, my comment gets rejected – so look here:

Law is a graduate degree. The most common undergraduate degree of attorneys is history.

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Natesays:

27 October 2011 at 4:14 am

Pamela – I have no idea what you’re getting at. I said that CEOs with liberal arts degrees *alone* are disproportionately underrepresented. Very few college presidents and attorneys (which, by the way, aren’t CEOs) achieve their goals without getting advanced degrees. So were you agreeing with me?

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Tinasays:

27 October 2011 at 5:30 am

In this case Pamela but EVERYONE on GRS:

If you’re going to make these statements PLEASE PLEASE PLEASE Cite your sources! Making broad statements with no way to back up what your saying is just not acceptable in my opinion, especially when your statement is NOT something that is a matter of opinion.

You can say: “You can major in history and become a lawyer.” But from all indications from simply googling it EVERYONE seems to say the most commonly held degree is Political Science. The next most common seems to be Business.

I’m MORE than open to being wrong on this, but I’m a little sick of people just saying things they’re not backing up with data or information.

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Tomsays:

26 October 2011 at 7:45 am

I’d like to throw this thought out there, anyone who has taken out Federal Loans since 2006 has an interest rate in the ballpark of rate of 6.8% FIXED, whereas borrowers prior to 2006 took variable-rate loans based on the 91-day treasury, and currently the interest is about 2.4 – 3.1% on their loans. I graduated in 2007 and feel lucky that the majority of my loans were variable and I’ve now “consolidated” to fixed 3%. I say “consolidated” in quotes because I only ever had one lender, so it was essentially a refinance for me.
That 3.5+ point spread has got to be killing the most recent graduates, ($50 a month difference between a 10-year 6.8% loan and a 3.16% loan @ the quoted $27k average debt) and it’s a shame that the situation hasn’t been addressed given today’s low-interest rate environment and the abolishment of the FFELP program.
Parent Loans have an even higher interest rate, which never really made sense to me, considering you’d expect the parent to have a better income and assets than the student…

I think the debt / starting salary ratio is a good idea. With loans and credit card debt my initial ratio was about 1:1. After a series of raises the first year on the job and a cheap living situation the credit card debt was gone and the remaining ratio was about 0.4:1. I had all of my loans paid off in two years and ten months.

• Good choices I made: I worked 20+ hours per week during two years of college (first and last years were too intense to manage that), I lived with my parents (NOT rent/food free, but about $300 less than rent/food without them), drove the same police-auction car as in college, didn’t upgrade cellphone/computer/iPod, used 100% of our wedding present money to pay off loans, and when I did move out lived with my girlfriend (now wife). She had about a $10K cash cushion, so I was literally saving $1500+ per month and sending all of it to the banks.

• Mistakes I made in college, some I wish I could take back: I spent $500 on “professional” clothes for my job at Men’s Wearhouse at graduation, before the first day even. Turns out wearing wool pants and ties in a manufacturing environment is ridiculous. And to make it worse I lost 20 lbs so those clothes are in storage for the day when I gain the weight back and get a management position. I also went out and bought an electric guitar the day I got a $5K personal loan my senior year (I had run out of student loan options). Dumb, dumb, dumb. Another bad choice was living in Boulder, CO my senior year instead of Golden, CO where my school was. It ended up working out because I did it to live within a few blocks of my now-wife, but living expenses were $400+ more per month just for that privilege.

• Moral of the story (nothing new here): Live like a broke slob as long as possible, keep your ratio below 1:1 especially if your job prospects aren’t great (i.e. non-finance, engineering, professional degree, etc.)

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Jaime+Bsays:

27 October 2011 at 12:25 am

You bought a guitar, I paid off the last few thousand of my truck note. At the time, I was thinking that the interest on the student loans was so much better than the car loan that it made perfect financial sense. (was still in school at the time, so not even making payments) What I neglected to consider was the fact that I would have finished paying off that car note years ago, but I’m still paying off my student loans today. Luckily, my interest rate is only 2.5% (maybe 2.1, I forget at the moment) so I may still come out ahead since that car note was at 10% but I don’t want to put pencil to paper to find out. Nothing I can do about it anyway, so why rub salt in the wound? lol

Worst financial decision I made with my student loans. Well, that and maintaining the full loan amount when I didn’t have to. I was working full-time while I went to school and my work paid limited tuition reimbursement. *shaking my head* I was definitely in my dumbass phase of personal finance. I went on a study abroad (that I still love) with that loan money and I also got lasik surgery (which I still love as well). So aside from my education I got a lot out of those loans, but in hindsight I could have paid for all of it out-of-pocket with some better frugal habits.

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PBsays:

26 October 2011 at 7:56 am

One little known benefit of having a parent working at some colleges: free tuition for your spouse and children. The spouse or child must still go through the acceptance process and be qualified to attend the college, but this is usually available for any full-time employee, from janitor to tenured professor. There is usually a time limit for children (age 24 here) and it obviously does not cover food, housing or books, but can be an enormous help.

Think about this when you choose your employer.

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Cindysays:

26 October 2011 at 10:45 am

This is so true with most state universities! But make sure you check out the details. I currently work at a state university part time, so this covers no tuition. However, once fulltime, (keeping my fingers crossed) it will cover tutition for myself, spouse, dependant child for an associates or masters degree. Unfornately my son is in his senior year at another college and my daughter is only in elementary school. Getting hired by our local university is very hard. One being they usually hire graduating students and two once an individual is hired they are usually there until retirement. I am very lucky I have a good job, good pay and I like my work. However, it is not for everyone. The campus lifestyle and working with students every day can get tiring.

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Carasays:

26 October 2011 at 11:00 am

Even if this is an option, it’s not a good idea to depend on it. My father taught at a commuter school that offered maybe eight majors, five of which were engineering (and electrical engineering being the ONLY acceptable major in his eyes). His entire “plan” consisted of assuming I’d be going there and living at home even though I would’ve never voluntarily chosen that school or that major. Looking back, I should’ve pushed back harder to go to my first choice school (the local state university) and found a way to make it happen despite strong parental disapproval and no financial support.

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PBsays:

27 October 2011 at 9:05 am

I know this doesn’t always work out. Of my three kids, our first did two years here and then transferred to art school, where she did another 3 1/2. The second joined the army out of high school, did two tours in Iraq, and now is back going through on the GI bill. Our youngest is here and looks to be dropping out for the second time, or possibly transferring to a two year business school. Kids are all different. And when this works, it works really well.

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Britsays:

26 October 2011 at 8:10 am

I absolutely loved this article! I dont think I’ve read anything on this website that was as relevant to me as this was. Thank you! I’m excited to read more in the future…also, waiting tables is EXACTLY how I’m going to pay off my student loans. Full time non-profit job, plus Cheesecake Factory on the nights and weekends equals debt gone in two years =)

If you get married while you’re in college your parents finances no longer count in your FAFSA applications and suddenly you can actually qualify for real money.

My wife and I got married our sophomore year and FAFSA covered the rest of our tuition. We paid for books/rent by working part time.

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Kayteesays:

26 October 2011 at 10:09 am

This works sometimes. My husband and I got married before I started grad school, all it really did was qualify me to take out more federal loans.

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Dawnsays:

26 October 2011 at 8:41 am

As mentioned before, what really bothers me is that most kids treat college like a given rather than an opportunity, and it never seems to occur to them just how much their education costs their parents.

But anyway, here’s how my husband and I are getting out of college with NO DEBT!

My husband and I have just started school as transfer students at UC Berkeley. We graduated from high school and got into a good amount of state schools but decided to go to community college to save money. We went to community college for three years while working and saving, then applied and we both got into Berkeley! We then decided to get married, since we knew we were going to eventually. We didn’t have a wedding, so we didn’t have to worry about those kinds of costs, but we did quickly file ourselves as independent students now that we were married. This means that we didn’t have to report our parents’ income, only our own, which came from waiting tables so it wasn’t substantial. Now our tuition and fees are paid for in full by school grants (no loans needed) and there’s even a few extra thousand dollars that gets deposited into our bank account for living expenses. Between the grants and our savings, we’re getting out of college with absolutely no debt.

This option definitely isn’t for everyone, especially for kids going to university straight out of high school, but if you have the means (a willing person) then it is an easy way to pay for college.

Even if you can’t get married, I definitely recommend the community college route. If you can get the same general education courses while paying so much less, then why not? A lot of people argue about the “college experience,” like living in dorms and such, but ultimately we’re all here for the degree, right? A degree from a school is the same whether you entered as a freshman or as a transfer.

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cw90says:

26 October 2011 at 9:43 am

A lot of articles on student loans don’t offer much in the way of how to deal with student loans that hasn’t already been mentioned….I would like to see more options on how to pay them off that doesn’t involve volunteering (Americorps, Peacecorps, etc.) in a third world country or teaching in the ghetto to do so.

Then there is always the direct approach…get a second or third job and dedicate the next few months or years to paying those bad boys off.

When I read articles like this and others that point out how much college is likely to cost by the time my 2 year-old gets there, I’m left with one thought: something has to change. I would need to invest a minimum of $500 a month for my daughter to be able to afford college tuition and all related expenses. That assumes a reasonable market return and that I only have one child. So if we have the two or three we plan then we have to save $1,500 a month for college? (Not likely give that our monthly take home pay is less than $3,000). If we’re lucky, based on our current income we may have my husband’s student loans paid off in time for my daughter to start college. I don’t have an easy solution, but I don’t see letting her start her career with $100,000+ in loans or giving up on the idea of college altogether as the way to do it.

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Rebeccasays:

27 October 2011 at 10:01 am

Don’t panic! Check out if your state has something like New Jersey’s Star program where kids in the top 15% of their class get free tuition to community college, and then get free tuition at 4 year state schools if they keep their grades up. There are lots of guidebooks such as Debt Free U to give you savings tips, but keep updating your planning, as these things change all the time. Just don’t assume it can’t be done without massive loans!

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Lindensays:

26 October 2011 at 9:50 am

I’d like to see that follow-up article about the FAFSA. As a parent of two young children, it would really help to know now what will determine our expected contribution in years to come… Thanks.

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Reggiesays:

26 October 2011 at 9:52 am

I know most GRS readers are of the belief that all debt is evil, but I believe student loan debt can be a major exception.

In order to see the benefit, however, you may have to look at it over a long time horizon – such as over an entire career.

Over an entire career, if you averaged only a $10,000 per year salary increase (averaged over the entire career, NOT starting salary) versus not having a degree, you’d come out $300,000 – $400,000 better in lifetime earnings (30-40 yr career). Is that worth taking out $20,000 – 30,000 in student loans?

I would say absolutely it is. And $10,000 per year could be a very low estimate, depending on the person’s college major and their employment opportunities post-graduation. This also does not factor in the non-salary benefits that often come with jobs that require a college degree — such as better health insurance benefits, better working environment, and other benefits such as extended maternity leave options (for example).

I’m not saying that getting a degree always pays out, because clearly it doesn’t always pay out. But I AM saying, it can be short-sighted to suggest that someone shouldn’t get a degree because they may have to take on substantial debt to do so.

I find it ironic that people would encourage someone to borrow $100,000 – 200,000 to buy a house that MIGHT appreciate 5% per year (offset by loan interest and maintenance costs), but discourage them from taking on 10,000 – 50,000 in debt for an investment that might pay 1000% – 30,000% (or more) return on that investment.

I agree that one should minimize the debt incurred if possible, but I find it short-sighted to suggest that student loan debt is generally a bad thing.

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BIGSethsays:

26 October 2011 at 10:15 am

Who knew that our desire for stuff is only matched by our desire for education? Hooray America!

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lost-in-translationsays:

26 October 2011 at 10:32 am

In the 20+ years since my daughter was born I was told to save for college, save for college, save for college… So I did was I was told and ended up with ~$15K in a 529 college savings account. So now I’m paying for her state college with this nest egg. Perfect scenario, right? Except many kids my daughter’s age are getting a free ride because their parents didn’t bother to save a dime and they’re in debt up to their eyeballs. I make $60K/year and pay off all my monthly debt except for the mortgage; they carry monthly balances in the thousands. My kid fills out the FAFSA and qualifies for student debt; they fill out the FAFSA and get grants. So, typically, the people trying to do the right thing get the shaft.

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Tomsays:

27 October 2011 at 11:11 am

I believe that your 529 distributions aren’t held against you on the FAFSA. Plus all that earning over the last 20 years is now going to be income tax free! Assets in the parent’s name are assessed at 5.64% maximum. A student’s assets are what kills your chances on the FAFSA.

Don’t be surprised if this anecdotal “free ride” isn’t just eligibility to take out unsubsidized federal loans. Being eligible for loans is not the same thing as a free ride to college.

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Jennesays:

26 October 2011 at 10:44 am

Depending on what your college requirements are to graduate– and the cost per credit– dropping that AP credit may not have paid off.

When I was in high school, I took 3 college classes in the summers, and also took 5 AP classes. At 4 credits per AP class, I ended up with TWO SEMESTERS already completed. I matriculated as a sophmore. Sometimes I wish I hadn’t, since I could have gotten (GOOD!) financial aid for the last year– but financially it saved me a lot.

Work study turned out to be somewhat of a bust for me because I had a full financial aid package– so when I was working 20 hours a week financial aid, it was essentially reducing my other aid. (That was 30 years ago, of course.) But if you are getting loans, federal work study is probably the way to go– in fact on campus jobs mostly don’t hire for non-workstudy positions.

Also remember that the ‘discount rate’– the amount the college gives in scholarships averaged across the whole entering class– can be as high as 50% but usually around 40-45% for private schools.

A lot of parents look at prices only, but it may be worth the trouble to apply and get a financial aid package to see how much they really expect you to borrow/loan.

I’m lucky; I work in academia and can probably get my kid(s) at least into the place I work at. I also won’t expect to do anything expensive– but I’ll be darn glad I have paid off my debts, because having existing debt doesn’t cut you a break on eligibility.

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Cindysays:

26 October 2011 at 10:49 am

Would love to see article on FAFSA completion.

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Christysays:

26 October 2011 at 11:09 am

I live in Oregon and the state has a program called College Now where high school students can earn college credits while attending high school. In my area high school students pay a one-time fee of $25.00. They can then earn as many College Now credits as their high school offers. I know one young man, who at the time of his high school graduation, had already earned 33 college credits and it cost him $25.00.

Love this article. For those who are depressed, just know that you can make it through college without being in mountains of debt! I will graduate in Dec. and will be completly debt free. However, I know some people who take the same classes I take and have $20,000 of debt. It is not a lifstyle, or a hangout.

The only thing I would suggest is that instead of having your college picked out and going for it, have your major picked out and go for it.

Changing majors every semester has really hurt a lot of people I know.

I say go to a 2yr college to get core classes because they are cheaper and easier, so that helps your wallet and your GPA. Then transfer to the college you would like to graduate from.

“I say go to a 2yr college to get core classes because they are cheaper and easier, so that helps your wallet and your GPA. Then transfer to the college you would like to graduate from.” Enthusiastic co-sign with a t-rex RAWR!

Just a caution–don’t depend on scholarships. As a financial planner, I hear over and over, my kid is so smart, he/she will get a scholarship. For private scholarships not connected with a university, the average award is $1,982, the length is one year, and only 7% of students land them. Most scholarships are awarded through the school you’re accepted at, as part of your financial aid package, and more and more of the top schools do need-only aid–after all, most of their students would all qualify for merit. If you do land a scholarship, some colleges will take it out of the “self-help” portion expected of the student (read, part time job or work study)so maybe if you work a lot now, you won’t work quite as much in college.

I’m not sure that for most kids spending hours and hours writing essays for a prize of $500 or $1,000 is worth it, and the ones with the big numbers, like Intel or Davidson, require a commitment for probably your whole high school career in order to produce work worthy of the scholarship. Scholarships are mostly worth it for the glory, not the cash.

I think a bright kid might be better off taking AP courses that will be accepted by the college of choice (check that carefully) and maybe having a part time job or starting a little business in high school. Starting a biz will also impress admissions.

Really, it’s a cost of time vs. benefit received to determine whether scholarship competitions are worth it. Also, the myth that websites will help you find “unknown” scholarships makes somebody a lot of money, but it isn’t students.

If you can get your child into an IB high school, do it. It stands for International Baccalaureate. Here in Colorado, a *high school* graduate from an IB school is allowed to enter college as a second semester SOPHOMORE. That is a year and a half of college credit given to them. And IB schools are public schools, so no, you don’t even have to pay a private school tuition.

Out of the remaining 2 1/2 years, you can still take core courses at a community college while going to your university of choice.

In general, I think that far too many parents pamper their children and allow them to slack off in school, get middling grades, and then when the kids don’t qualify for scholarships since they are absolutely unremarkable on paper, they whinge and beg to go to some fancy private school, and for some reason parents cough it up. I think, barring legit learning disabilities that hinder one’s success in traditional public schools, that children should be advised that their job, during the 4 years of high school, is to get good grades, and immerse themselves in either a good part time job, or after school activities that they love. Hanging out at the mall stealing jewelry from Claire’s or getting pregnant is not, as you may have noticed, a third option. Nor is being absorbed into the couch cushions for hours each day being lulled into a slack jawed dreamland by MTV. Personally, without much parental support, I looked at high school as a job for which I could determine how much I could get paid in the future- via scholarship money. I’m not talking being all crazy Tiger Mom and ruining your kid’s childhood or making them into worker bee drones, but I AM saying that they need to know that it is within their power and it is their responsibility to care about their grades, so that they won’t be disqualified from even applying for a scholarship because of something like not having a high enough GPA.

Lastly, regarding scholarships- I want to chicken fry kittens whenever I hear about kids giving up full ride scholarships because “I want to go out of state and live with my friends”. And then, oh look, here comes mom and dad, dutifully either taking loans out in their name, or co-signing loans in their kid’s name. I really think that parents need to be a lot more firm with kids when it comes to allowing them to just give up full rides to in-state, public schools because Suzy and Marie and Johnny are all going to Out of State Student Loan Prison Creation University.

Wait, one more lastly- for the love of cheese nips, please can we all realize that working a part-time job will not irrevocably scar college kids, and will help them structure their time and learn to manage money? I worked full-time and went to school full time and caroused my little college ass off, and still maintained my GPA for my scholarship. It can be done.

I went to an IB high school, and received (IIRC) 36 university credits for my IB exams (and diploma) – but some schools didn’t know anything about IB, and AP classes would get the same results as IB classes.

That said, I would highly recommend the IB curriculum to anyone in a public school who is talented and has the option to participate. I think the academics are much better than AP or (shudder) regular public high school classes. Heck, I have gotten more use from my IB education than my college degree.

Which brings me to my other comment – college is a huge scam for a lot of people. If you want to be a licensed professional (engineer, doctor, lawyer, etc) then absolutely go to college. If you are self-motivated and intelligent, I would seriously consider skipping it. Getting a degree was by far the biggest financial mistake I have made.

I went into college right from high school without really knowing what I wanted to do, and ended up realizing halfway through that I wasn’t going to want to use my (engineering) degree. If I could do it over, I would either have skipped college to pursue my actual interests, or done a community college/state university combination to get a generic degree (most jobs just want to see some piece of paper, doesn’t matter what it’s in or where it came from) as inexpensively as possible.

Good article. One comment – I wouldn’t entirely write off working for a nonprofit after college. I graduated from a Masters Degree program in 2006 and I had $121,000 in student loan debt. I began working for a nonprofit immediately after graduating and I’ve managed to repay $80,000 in principal and $30,000 in interest (so far). According to the aggressive repayment plans that I’ve prepared for myself, I should be rid of the remaining principal balance within 12 – 14 months.

All of that on a nonprofit salary!

Most people think of nonprofits as the local soup kitchen down the street or the local SPCA. There are mega massive nonprofit organizations that offer competitive salaries while still working in the community (think Gates Foundation or Dodge Foundation or the CDFI industry with groups like The Reinvestment Fund, Boston Community Capital, or New Jersey Community Capital). So, before the readers write off an entire sector as unacceptable for potential employment, just be sure that you’re looking at the right employers within that sector.

And good luck!

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Honeysays:

26 October 2011 at 11:29 am

Timely considering Obama’s announcement today. My new plan is income-based repayments for 20 years and the rest will be forgiven. It’s really the only affordable option for me (I have a PhD and $100K in loan debt).

I could be wrong, but I don’t think income based repayment lasts forever and the payments are adjusted upward every year if you have an increase in income. We are currently using income based repayment to pay back my husband’s student loans (normal payments would be almost 1/4 of his take home pay), but my understanding is that this is only temporary measure lasting 3 to 5 years. Though I could be mistaken. Any windfall we have gets thrown at principle payments, even though many people have told me it’s a waste of money and we should just wait for the loans to be forgiven after 25 years. Personally, I’d rather not wait that long to be debt free.

Wait, sorry, one more thing- a huge money suck is studying abroad. I really wanted to study abroad in college, but I worked as an RA for one of my (3) jobs that totaled about 45 hours a week, so I couldn’t go during the school year, and during the summers I didn’t want to give up my other jobs because they supported me well.

My solution? I applied for a job teaching English in Japan. I knew by March that I would be leaving in August, so when I graduated in May I was all set to work my summer job and leave. I had a blast, lived abroad for a year, and here’s the best part- I made a good living, got great work experience, and met amazing, like minded people. If your kids are trying to take out an extra $5K in loans for a semester study abroad, maybe try and convince them to wait until they can work abroad instead. Teaching English can be done anywhere in the world, usually with just a bachelor’s degree. (I realize this will not work for everyone due to different native languages)

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Rebeccasays:

27 October 2011 at 9:54 am

This goes to show how advice that might have been great a few years ago can not apply anymore. When I went to college in the early 90′s, going abroad for a year was a huge money saver for me and my parents- the cost was about 1/3 of regular tuition for my China program and I received full credit for my time there. Now my school has wised up and created their own program that you have to go through to get credit- it costs more than a regular school year. I would check out The New Global Student by Maya Frost for advice on how to travel and learn in your teen/college years. I plan on following many of its recommendations for my kids.

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Kevinsays:

26 October 2011 at 11:44 am

The problem is the colleges. Tuition does not have to rise every single year. It rises because colleges are run like businesses and constantly try to suck in more money to enhance their “prestige.” Colleges should not be businesses. Every policy at every college in this country should be aimed at REDUCING tuition, not increasing it. It is amazing to me that everyone in America takes it for granted and considers it acceptable that colleges in this Country raise their tuition at a rate higher than inflation every single year.

The answer is not to provide more taxpayer-backed government loans and grants to students. This just amounts to more money funneled to the piggish colleges. It will result in colleges continuing to raise tuition to get access to the new government loan/grant money. The answer is to CUT OFF the flow of money and hold every college accountable for their ruinous decisions to constantly raise tuition as a matter of course. College administrators are making selfish decisions every day that bankrupt America’s youth and future. Yet we stand idly by . . .

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LAsays:

26 October 2011 at 2:11 pm

Kevin,
I know what you’re saying about college tuition. BUT (at least at my institution) there are 3 ways colleges bring in revenue: 1) taxes 2) state contributions 3) tuition. Taxes, depending on the local economy, may decrease. Our state is way behind in contributions. That leaves tuition which is increased to make up for the shortfalls in the other two categories.
Colleges can’t operate at a deficit for long.
What are your thoughts?

Agree with LA. Hate rising tuition costs? Tell your state to stop cutting off funding. If you want state universities to be run like businesses, then they will cost what private universities cost. Period.

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Acesays:

26 October 2011 at 11:46 am

One very important point I’m surprised the author didn’t mention: a four-year degree should be completed in FOUR YEARS (or less). A two-year degree should be completed in TWO YEARS. Etc.

It is shocking how many students voluntarily increase the cost of their education by 25% by taking five years to complete a four-year degree. Pick a major. Stick with it. Take a full load, and finish on time.

YES. And, especially with tuition rates going up each year, even an extra year or two can really add up.

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BBsays:

26 October 2011 at 4:07 pm

You know what else is shocking? A state university offering required course for several majors only every other year or even every third year. Students can’t finish in 4 years under these conditions. Average time to complete a degree become 5, 6 or more years- not due to student laziness, but due to insane school policy.

One caveat about AP credits: a lot of colleges won’t give credit for AP exams, even if a student gets a 5 (perfect score). At my younger daughter’s college I learned this is because AP classes at many high schools are specially-packaged classes, with special AP textbooks, from the ETS. Colleges don’t find the AP classes equivalent to what they offer. I can see the point: this daughter took several AP history classes, yet was never required to write a paper, do historiography (history research using original source documents), or even use college-level texts. Now a senior, she tells me how high school AP classes were nothing like her college classes.

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Chasesays:

26 October 2011 at 4:11 pm

I failed miserably in regards to this. I changed my major three times, each in an unrelated field. I am in my last year of seven (that’s right), and will be graduating in the spring with my engineering degree.

There are definitely worse places I could have ended up. I’ll be graduating with an approximate 2:3 debt to income ratio from one of the best colleges in the country (I transferred). I’m extremely thankful to my parents and grandparents who saved money since I was born for college. Without that, I wouldn’t be afforded the opportunity to find something that I enjoy doing and is both challenging and profitable.

As a pay-it-forward measure, if my sister decides to have children I will contribute to their educational savings accounts from birth.

If you don’t know what you want to do going into school, it may be a good idea to take a year or two off and work. The “college days” will be waiting for you if you want them.

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SLCCOMsays:

26 October 2011 at 6:34 pm

That isn’t always an option. The music program at our local university gives a lousy 1 credit for courses involving 3.5 contact hours, which means those should be 3-credit courses. So these students are working their hineys off for what looks like just 6 or 8 credit hours, and they can’t possibly finish in 4 years. Why the school lets the department get away with it I have no idea.

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BBsays:

27 October 2011 at 3:20 am

And the majors that require 130 credits to graduate, including 1 credit practicums that are also 3 or 4 hours per week– very hard to finish in 4 years and impossible to have a job during the school year.

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Cherylsays:

26 October 2011 at 2:59 pm

One thing that worked out very well for my college freshman daughter was applying to a school that is known for giving great aid. Someone (may be The Princeton Review; I’m not sure) puts out a financial aid honor roll every year. My daughter’s school is not on the current list, but it was a few years ago. We used The Best Northeastern Colleges (Princeton Review) as a guide when narrowing down her choices. It gives each school a financial aid rating. We found it to be pretty accurate. Her college had a financial aid rating of 99, and the one that pretty much expected me to take on $100,000 in debt over four years, which was NOT an option for us, had a rating of 74.

Also, as I believe a few people have mentioned, different schools have different methods of applying outside scholarship funds. Some let you “stack” aid, while others deduct scholarships from their merit or grant aid, which really isn’t helpful to the student. Just another thing to consider when making a final college decision.

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whoisbigglessays:

26 October 2011 at 5:25 pm

When I attended University in here in Australia our experience is a little different. If you are offered a university place our Government will lend you the money to go.
The average cost of each accounting subject was $600. 24 subjects to complete the degree.
If you repay the government upfront before commencing a subject the amount you payback was reduced by 25%.
If you made voluntary repayments after completion of your degree the amount you paid was deemed to have been 15% more than you actually repaid.
Otherwise a percentage was deducted from your take home pay once you were earning more than 20k.
The interest rate on the outstanding debt was the rate of inflation.
You can have up to 7 years of this government support (the length of our medical degrees) before you need to make other arrangements to pay for study.
The problem in the USA from afar seems to be that the Banks and other financial institutions make the bulk of the loans and they have to make a profit on these loans. Whereas our govt. is still in a nation building phase (200 odd years and counting) and the provision of this program is seen as being for the long term economic good. Students still complain here about having to pay anything when most of our parents generation went to university for free – however that overlooks the fact there was only 4 universities in Australia at that time and today there are in excess of 30.

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BBsays:

27 October 2011 at 3:25 am

You are right that private financing caused the huge balloon in college debt.
When my husband and I went to college, students commonly paid for education through a federal program that had low interest and up to 10 years for repayment after the terminal degree (plus a 1 year grace period). Interest did not accrue while one was in school. My $10K debt had something like a 2% interest rate on it and cost us $165 a quarter for ten years.

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stonalinosays:

26 October 2011 at 7:34 pm

Tim, if you really want to write a FAFSA article, get in touch with me. It’s what I do for a living, and I’ll give you all the information you need.

Agree with previous commenters that it is important not to generalize one’s own experience to all experiences.

Some schools, particularly well-endowed ones, do one thing, some schools do another. This is especially true for all aspects of student grants and loans. Students who are attractive to colleges are treated one way, and students who barely get in are treated another. Students whose parents have a certain income get different packages than students who make more or less.

So yes, talk about your own experiences, but realize that you need to do actual research for things when you’re making general statements.

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Hilarysays:

28 October 2011 at 2:22 pm

That’s completely true. For example, I was a national merit scholar and was offered full scholarships to public universities outside of my home state. Not one university from my home state offered me a full scholarship! This was good news for me, because I desperately wanted to go to college out of state anyway. :p But I would have paid much more for tuition and housing to go in-state.

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Alciesays:

27 October 2011 at 11:19 am

I’m late seeing this, but enjoyed the article and the examples of the application of liberal arts thinking. I wanted to point out that your choice of major affects not only how much you’ll make coming out, but also how much you have to work on your education while you are in college. There’s a difference in the workload between an electrical engineering major and an English major. It’s important to know early on in the process what you are going for, if you want to make the most of your time and dollars invested.

The 2 yrs community college and completion of a 4 yr degree at a state school while working 20 hrs+ a week may work for some majors and career paths, but for others it’s a waste of two years. I went to a very demanding liberal arts college and majored in the sciences. The majority of people who transferred in to my school & major in their sophomore or junior year (from CCs or large state schools) failed out or barely passed their 1st semester. They seldom graduated from my school, choosing to transfer again to someplace easier. They were simply not prepared for the level of work we were expected to do in advanced level courses.

In my freshman year, there was no time to work a part time job. There was only time to attend classes or study, all the time. There was no time for wild partying, if you wanted to get the grades to continue on to upper division classes. I worked on classwork from early morning until late at night, 7 days a week. At most I took a few hours on Friday afternoon to take a hike or hang out with friends. My friends weren’t off having lots of fun without me, since they were on the same study schedule as I was. We did do study groups together sometimes, maybe that counts as a social activity. In my sophomore yr, I got a very part time job, 4 hrs a week, working as a lab helper. Most of my friends thought I was nuts to add that to my already demanding schedule. By my senior year, I had worked out enough time management skills to have time to add doing research to all of the above. I still worked only the very part time job.

I, and all of my friends, got into good grad programs that paid for our support (although not above bare bones) and education. My very demanding undergrad made the classes in grad school a piece of cake in comparison to my undergrad classes. By then I had added in teaching responsibilities, my research, my advisor’s research, and the various service obligations that come with grad school in the sciences. I got it all done, but there was no time to get another part time job, and we weren’t allowed to anyway. If we had had the extra time for a job, then we would have time to take on a portion of another research project.

So everyone who is thinking about what you or your kids will be able to do in terms of earning income while they are in college, keep in mind that many of the majors that lead to solid well paying jobs expect total commitment. Taking a pay-the-bills job at the expense of keeping up your grades and participating in the research or entrepreneurial activities that are not strictly required for a degree but are necessary for getting into the best grad schools or getting a shot at the best post college business opportunities may prove penny wise and pound foolish.

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